5.2. Instruments

• Green bonds and climate bonds

• Green asset-backed securities

• Green loans

• Green funds

• Green project financing operations

• Green indices

are the most significant financial product and a pioneer for other productsand services in the sector of green finance

finance projects with a positive environmental impact for which the buyersalso have an assurance

• Renewable energy

• Sustainable management of natural resources

• Energy efficiency

• Pollution control and prevention

• international financial organizations,

• large corporations,

• banks,

• national governments and

• municipalities

institutional investors

• Use of proceeds

• Process for project evaluation and selection

• Management of proceeds

• Reporting

• Green asset-backed securities are on the traditional scheme of securitization.

• Thereby, previously illiquid assets are converted into tradable securities.

• An asset backed security (ABS) is labelled as a “green” ABS when the underlying assetsare financing environment-related projects and the issuance of the tradable securities is inline with the core components of the GBP.

• These securities include e.g. solar ABS, electric automobile ABS or property assessed cleanenergy ABS.

• This results in a high degree of heterogeneity as the types of assets and the methodologiesin use are very diverse.

• As of today, assed backed securities represent a significant percentage of green bondsecurities (~17% of the whole market).

• are used for environmental projects whichrequire smaller-scale investments.

• The issuance requires substantial screening, labelling, disclosure and control-relatedactivities.

• Use of proceeds

• Process for project evaluation and selection

• Management of proceeds

• Reporting

s to create a framework of market standards for green loans whileallowing the loan products its flexibilities

1. Regarding the entity to which the guidelines are mainly addressed:

   • GBP: issuer

   • GLP: borrower

2. Regarding the potential coverage of the theoretical market:

   • GBP: all eligible bond issuances

   • GLP: fundamentally restricted to loans of a big sizes

Green funds are approaches of the traditional funds industry to include environmenta lconsiderations into their investments by different rudiments

• Best-in-class strategies: “using specific criteria to identify companies that perform bestin terms of environmental impact within different sectors or industries.”

• Themed strategies: “investing in sectors that are essential to climate change and theenvironment (e.g. energy efficiency or waste management).”

• Norm-based strategies: “relying on national or international standards and norms tobuild green portfolios.”

• Engagement and voting strategies: “implying investing in companies and activelyparticipating in company ́s decision making encouraging better environmentalmanagement and process.”

• Exclusion strategies: “excluding companies from portfolio that do not suite givenenvironment-related principles.”

• Project finance is mainly used for large, long term infrastructure and industrial projects.

• It generally relates to a variety of techniques used to finance a project where repayment isdirectly based on future cash flows.

• To date, there is no standardized definition of what characterizes green project financing.

• There are a few principles, but they have not gained widespread acceptance.

• But the use of the proceeds coming from the deal between the sponsors and syndicatescould eventually characterize a project as green.

• In practice the identification of a green project financing operation may result from anautonomous decision of the sponsors.

• Market indices provide cost-effective, easy-to-understand and usable information on theproducts they are built on.

• They are serving the funds industry as benchmarks for investment strategies.

• Green Indices have recently boomed from 2014 and can focus on:

  • Specific types of securities (in particular on fixed income and equity)

  • Specific sectors (e.g. water management or solar energy)

  • Representing the wider green sector

• Today, the majority of the traditional indices providers have developed sustainabilityoriented or green equivalents.